Oil Rises to Four-Month High as Fed Keeps Asset Buying

Jan. 30 (Bloomberg) -- Oil rose to the highest level in
more than four months as the Federal Reserve maintained an
asset-buying program to boost the economy.

Oil advanced for a third day and the dollar weakened
against the euro after the Fed said at the conclusion of a two-day meeting that it will keep purchasing securities at the rate
of $85 billion a month. Crude headed for the biggest monthly
gain since August as the Labor Department may say on Feb. 1 that
hiring increased in January.

“There’s increasing confidence about the economy,
expectations for a positive jobs number Friday, and the Fed said
it’s going to continue with stimulus,” said Jason Schenker,
president of Prestige Economics LLC, an Austin, Texas-based
energy consultant. “Oil is moving higher because there’s reason
to be optimistic about the economy.”

West Texas Intermediate for March delivery rose 37 cents,
or 0.4 percent, to $97.94 a barrel on the New York Mercantile
Exchange, the highest settlement since Sept. 14. Prices are up
6.7 percent this month. Trading was 1.7 percent below the 100-day average for the time of day at 2:40 p.m.

Brent for March settlement added 54 cents, or 0.5 percent,
to $114.90 a barrel on the London-based ICE Futures Europe
exchange. Trading was 9 percent above the 100-day average.

The Fed asset purchases will remain divided between $40
billion a month of mortgage-backed securities and $45 billion a
month of Treasury securities.

Labor Market

The central bank repeated that the purchases will continue
“if the outlook for the labor market does not improve
substantially.” It also left unchanged its statement that it
planned to hold its target interest rate near zero as long as
unemployment remains above 6.5 percent and inflation remains
below 2.5 percent.

The euro rose as much as 0.7 percent to $1.3587, surpassing
the $1.35 level for the first time in more than a year. A
stronger euro and weaker dollar boost dollar-denominated oil’s
appeal as an alternative investment.

“A weakening U.S. dollar will provide some support to
crude prices,” said Tom Doremus, an analyst at Tradition Energy
in Stamford, Connecticut.

The Labor Department may say on Feb. 1 that the U.S.
economy added 165,000 nonfarm jobs in January, up from 155,000 a
month ago, according to a Bloomberg survey. The U.S. is the
world’s biggest oil-consuming country.

Mideast Conflict

The AFP report, citing people it didn’t identify by name,
comes three days after Israel’s Prime Minister Benjamin
Netanyahu issued warnings about the dangers posed by Syria’s
chemical-weapons arsenal in a country suffering a civil war.

“It reminds us that the geopolitical risk factors are
still high,” said Phil Flynn, senior market analyst at the
Price Futures Group in Chicago.

Oil fell earlier as U.S. inventories gained more than twice
as much as expected last week as the nation’s economy
unexpectedly shrank in the fourth quarter.